~ Dr.Suneel Sethi's Blog

Monthly Archives: June 2014

Nani Palkhiwala, the eminent Indian lawyer, wrote this on 16 January 1984, about his dog and then compared him with the Indian Politician.

The picture that emerges is that of a great country in a state of moral decay. The immediate future seems to belong to the doomsayers rather than to cheer mongers. We suffer from a fatty degeneration of conscience, and the malady seems to be not only persistent but prone to aggravation. The life style of too many politicians and businessmen bears eloquent testimony to the truth of dictum that the single minded pursuit of money impoverishes the mind, shrivels the imagination and desiccates the heart. The tricolor fluttering all over the country is black, red and scarlet – black money, red tape and scarlet corruption.

My dog sleeps about 20 hours a day, He has his food prepared for him, He can eat whenever he wants, 24/7/365. His meals are provided at no cost to him. By the way he does not need to pay for medical insurance He visits the doctor once a year for his checkup, and again during the year if any medical needs arise. For this he pays nothing, and nothing is required of him. He lives in a nice neighborhood in a house that is much larger than he needs, but he is not required to do any upkeep. If he makes a mess, someone else cleans it up. He has his choice of luxurious places to sleep. He receives these accommodations absolutely free. He is living like a King, and has absolutely no expenses whatsoever. All of his costs are picked up by others who go out and earn a living every day.

I was just thinking about all this, and suddenly it hit me like a brick in the head. My dog is like the Indian Politician. The difference is, he is honest and grateful for what he gets.

Like this:

This is a very simple way to understand the tax laws. Read on — it does make you think!

Let’s put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men — the poorest — would pay nothing; the fifth would pay $1, the sixth would pay $3, the seventh $7, the eighth $12, the ninth $18, and the tenth man — the richest — would pay $59.

That’s what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement — until one day, the owner threw them a curve (in tax language a tax cut).

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily meal by $20.” So now dinner for the ten only cost $80.00.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his “fair share?”

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would end up being paid to eat their meal. So the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59. Each of the six was better off than before. And the first four continued to eat for free.

But once outside the restaurant, the men began to compare their savings. “I only got a dollar out of the $20,” declared the sixth man who pointed to the tenth. “But he got $7!”

“Yeah, that’s right,” exclaimed the fifth man, “I only saved a dollar, too . . . It’s unfair that he got seven times more than me!”.

“That’s true!” shouted the seventh man, “why should he get $7 back when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison, “We didn’t get anything at all. The system exploits the poor!”

The nine men surrounded the tenth and beat him up. The next night he didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered, a little late what was very important. They were fifty two dollars short of paying the bill! Imagine that!

And that is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straightforward logic.